Video summary

Building a Silver Mine in Mexico, But Can Costs Stay Under Control? | GoGold Resources CEO Interview

Main summary

Key takeaways

Business

Business / Strategy Overview (GoGold Resources)

  • Core thesis: Build a silver–gold district in Mexico anchored by an operating tailings cash engine (Peral, Chihuahua), while executing Las Rico South first, then scaling via Las Rico North.
  • Operating + development model:
    • Peral tailings retreatment provides free cash flow to fund general support while Los Rico is constructed.
    • Las Rico South is moving from permitting into construction (main near-term value driver).
    • Las Rico North is a parallel future expansion path (studies + permitting leading to the next construction decision).

Key Playbook / Process Elements (De-risking Build Time)

Execution readiness playbook

  • Consolidate/validate historical data: digitize old reports and archives.
  • Complete detailed engineering (~85% complete) before/around permitting.
  • Order long-lead equipment early: e.g., SAG mill ordered ~6 months prior.
  • Secure EPCM and underground development contractor: let key construction contracts early.

Study staging / risk framing

  • PA → PEA/Pre-feasibility → Feasibility, with explicit uncertainty ranges:
    • PA: ±50%
    • Pre-feasibility: ±25%
    • Feasibility: ±10%

District build timeline sequencing

  • “First pour” milestone in South, while North permitting/engineering advances concurrently so the build team can roll forward.

Concrete Asset Details & Examples

Las Rico South (flagship build)

  • Type: Low sulfidation epithermal silver–gold vein system
  • Location: ~100 km northwest of Guadalajara, Jalisco, Mexico
  • Permitting: Final SEMARNAT approval received ~2 months before interview; construction approved
  • Feasibility (Jan 2025):
    • ~91M ounces silver equivalent at ~276 g/ton (silver equivalent basis)

Operating economics framing (CEO explanation)

  • LOM build target: 24 months to reach first pour
  • Ramp to full commercial production: +6 months (about a ~6-month ramp)
  • Mining approach: bulk underground (sublevel longhole; remote stope operations; paste backfill to stabilize ground)
  • Mill approach: 2,000 tons/day whole ore leach plant producing dore bar, sold at ~99.5% of spot (not a concentrate model)

Las Rico North (next expansion leg)

  • Status: Has a PA; intended to follow South into construction once the first mine operates
  • Planned contribution (CEO-provided):
    • North expected to add ~8.8M silver equivalent ounces/year
    • District goal target: 15–17M silver equivalent ounces/year at all-in costs ~US$12/oz (CEO framing)

Peral Tailings Operation (cash engine)

  • Location: Chihuahua State (tailings retreatment)
  • Life: ~4 years remaining (CEO statement)
  • Scale / operations:
    • ~12 years continuous production (first pour June 2014)
    • Monthly run-rate (approx.):
      • ~30,000 oz silver/month
      • ~400 oz gold/month
    • Cost framing: about US$4M/month (CEO statement)
  • Technology / differentiation:
    • Elomirated heat leach of tailings + cement/pelletization into heaps
    • SART to regenerate sodium cyanide and produce saleable copper/zinc precipitates (Samsung cited as buyer)
  • Cash flow claim:
    • At current commodity prices, ~US$80–90M/year after costs
    • About ~US$60M after tax mentioned later for broader project context

Key Metrics & KPIs / Targets Explicitly Stated

Project execution targets

  • Las Rico South

    • First pour: ~24 months after build initiation
    • Ramp to full commercial production: +6 months
    • Detailed engineering: ~85% complete at time of interview
    • Largest portion of build: underground + mill + paste backfill

  • Cost / break-even KPI

    • AISC: ~US$12/oz silver equivalent (explicit “all in sustaining is 12 bucks” threshold)

Production growth KPIs (district-level)

  • Peral: producing silver equivalent to support district build
  • Los Rico South (post-build):
    • Adds ~7.2M silver equivalent ounces
    • Combined with existing Peral production: ~9M silver equivalent oz/year at top-quartile costs (~US$12) (CEO statement)
  • Los Rico North (future):
    • Adds ~8.8M oz/year (projected)
    • District target: ~15–17M oz/year at ~US$12 all-in cost (CEO statement)

Financing / balance sheet KPIs

  • Cash on hand: ~US$284M at end of quarter (CEO statement); no debt stated
  • Capex estimates:
    • Feasibility capex: ~US$227M (study)
    • Inflation uplift (~18 months): ~US$260M expected
    • Execution tracking: “around $255 left to spend” after EPCM tracking
  • Free cash flow support (Peral):
    • ~US$80–90M after costs
    • CEO also connects interest on bank balances to covering G&A (exploration and overhead)

Economic Drivers, Sensitivities, and “What Changed”

NPV / feasibility vs earlier study

  • CEO states economics weakened from PA/earlier work to feasibility, despite improved grades/resources, attributing this to:
    • Reduced study uncertainty (PA vs feasibility maturity)
    • Mining method change: earlier plan contemplated an open pit with high strip ratio economics; political/social climate drove a shift to bulk underground with a smaller tail-end open pit
    • Discount rate / study framework and social acceptance constraints

Inflation and updated pricing framing

  • Feasibility does not fully bake in inflation, but metal price sensitivity exists.
  • Inflation assumption: ~8–10% in Mexico
  • Study ~18 months old → capex uplift to ~US$260M

“Bare minimum” viability

  • CEO indicates the project works down to their AISC threshold:
    • Break threshold: ~US$12 silver equivalent
    • A “50% drop” scenario was described as still workable under their AISC framework (no additional hard numbers beyond the AISC threshold provided)

Operational Tactics & Technical Execution Details (Actionable Items)

  • Underground critical path: development rates and access/portal timing

    • Portal timing: first 4–5 months of the 24-month build
    • Ore for commissioning: produce enough earlier than first pour (but not immediately at full 2,000 t/d)
    • Ramp strategy: mill not at full rate at first pour; ~6 months added to reach full commercial

  • Underground mine method: bulk longhole/sublevel longhole with paste backfill for:

    • Stability
    • Reduced pillar loss (optimize extraction vs leaving pillars)

  • Early ore generation allowed by permit:

    • Hill slope stabilization / portal area activities to generate early feed
    • References to “slab off” hillside stabilization

  • Geotechnical de-risking:

    • WSP used for feasibility geotechnical work
    • Additional geotechnical drilling (20+ holes) during construction to confirm:
      • Portal location stability
      • Hanging-wall conditions

  • Mining dilution & recovery:

    • Feasibility sensitivity cited: ~30% plan dilution manageable for grades/structure width
    • Recovery stated around ~90%; metallurgy “not a challenge”

Sales / Marketing / Investor Relations (High Level)

  • CEO says they continue to market/communicate for transparency with shareholders, even while claiming no near-term equity is needed.
  • Messaging/catalysts emphasize execution updates and district progress; North permitting and study progression expected to drive valuation later.

Risk Register (Business Execution Emphasis)

  • Primary risks
    • Commodity price risk (mitigation via margin positioning)
    • Underground execution risk (considered higher than mill construction)
    • Safety (explicitly top priority)
    • Community/social license risk (mitigation: early community engagement; unanimous support per CEO)
    • Water risk (mitigation: underground water sources; dry-stacked tails; water balance discussed)
    • Geotechnical surprises (mitigation: extra drilling; WSP program; paste backfill; stability management)
    • Capital/financing risk (mitigation via cash + no debt + engineered scope; CEO says no equity raise unless capex ~US$400M)
    • Security risk (CEO reports no security issues over 30 years in Mexico and describes government responsiveness if threats arise)

Specific Financing / Equity Raise Logic

  • CEO asserts:
    • No need to return to market for equity under normal capex outcomes
    • Capex “blowout” threshold: if capex reached ~US$400M, they’d likely revisit financing
    • Revolving credit facilities discussed as “insurance” (with carrying costs), but preferred not to use

Presenters / Sources

  • Interviewee / source: Brad Nichol, CEO & President, GoGold Resources
  • Host / interviewer: Antonio (host of the Resource Talks interview series)

Original video